MD of NK Proteins granted bail in NSEL case
1 min read 28 Jan 2014, 05:23 PM ISTNK Proteins to pay `25 cr upfront and `5 cr every month to NSEL over the next 4 years, according to a settlement plan
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Mumbai: A Mumbai court on Tuesday granted bail to Nilesh Patel, managing director of NK Proteins Ltd, in connection with the ₹ 5,574.35-crore payment crisis at the National Spot Exchange Ltd (NSEL).
Patel, who was arrested by the economic offences wing (EOW) of Mumbai police on 22 October, is the son-in-law of NSEL’s former chairman Shankarlal Guru, who resigned from his post on 19 August.
NK Proteins, one of the biggest defaulters of the commodity spot exchange, owes about ₹ 964 crore to NSEL.
Patel was the first borrower to be arrested by the EOW in the NSEL crisis.
During Patel’s custody, NK Proteins proposed to pay ₹ 275 crore to the commodity spot exchange. According to a settlement plan submitted by NK Proteins, it proposed to pay ₹ 25 crore upfront and ₹ 5 crore every month to NSEL over the next four years.
The crisis at NSEL came to light on 31 July when the exchange abruptly suspended trading in all but its e-series contracts. The e-series contracts were suspended a week later.
The closure of trading may have been prompted by an instruction from the ministry of consumer affairs to the exchange, asking it not to offer futures contracts. A spot exchange isn’t supposed to do so, but NSEL was doing it.
NSEL tried to implement the change but because its appeal was to investors and members who were not interested in spot trades, it eventually had to suspend all trading.
All trading on NSEL, it later emerged, happened in paired contracts, with investors, through brokers, buying a spot contract and selling a futures one for the same commodity. They pocketed the difference.
The entities selling on spot and buying futures were planters or processors and members of the exchange. It turned out there were only 24 of them, and they used the paired contracts as a way to raise easy money.
When the trading was suspended, the investors were left holding contracts that the members couldn’t buy because they didn’t have the money to do so.
On 14 August, NSEL had proposed a payout plan, but it has been unable to stick to the schedule.
